Sourcing 101 - The Difference Between Suppliers, Distributors & Manufacturers
In today’s manufacturing landscape, understanding where your materials are coming from, and improving collaboration with those sources, is crucial for preventing shortages and navigating supply chain disruptions. In this blog, we break down vendor vs. supplier vs. distributor—and even talk about wholesalers as well—how they compare, and how manufacturers can improve collaboration.1
Before discussing the differences between suppliers, distributors and manufacturers, let’s first make sure we understand the order of the supply chain. Here’s a quick rundown: The supplier (typically a manufacturer, packager or processor) provides the products to the distributor, who has a direct relationship with the supplier. Then, the wholesaler buys large quantities of products from the distributor and sells them to retailers. And finally, the retailer sells goods to the customer.2
What is a Supplier
To kick off the process, the supplier provides the raw materials to make the goods or services. They may either purchase these products from a manufacturing company, or the supplier may act as the manufacturer themselves. As the source of all goods and services, the supplier then sells products to distributors and wholesalers.
As a business-to-business (B2B) entity that provides goods and services to customers directly from the manufacturer, a supplier can also be the manufacturer—for example, the supplier of raw materials like lumber, steel, or oil. A flour milling company is a supplier who sells to a vendor, like a bakery, who then sells to the final customer. A supplier that isn’t a manufacturer merely acts as a middleman, obtaining product from the manufacturer and supplying it to other businesses.3
One of the key distinctions is between a supplier and a vendor. In manufacturing, a supplier sells to other businesses and supplies directly from the manufacturer or are the manufacturer themselves. With physical products, vendors typically sell to end customers and get their products from suppliers. Additionally, although suppliers usually work with physical products, vendors are a more typical term businesses use for those who lean more towards software and/or services.
Sometimes the line dividing supplier and vendor is blurred. Manufacturing companies sometimes refer to any entity they contract with as a supplier or a vendor. Another example of the line being blurred is a vendor who produces their own goods. A person who sells a product in the market is a vendor, but that same person may also own a production center and provide bulk items to themselves and similar companies. In this case, they’re also a supplier.
What is a Distributor
A distributor buys products from a supplier, houses them in a warehouse, and then sells them to vendors or end consumers. Distributors can be B2B or B2C depending on what they sell. Distributors take care of the often complex and burdensome purchasing of raw materials for large companies. This simplifies the purchasing process for large companies and allows them to go through just one distributor to get their goods. Distributors usually keep stock of certain products so these types of companies can have quick access to them. One great example of this is an online vendor who distributes orders from their various warehouses of product. They don’t make products or “add value” (i.e. they don’t make any changes to the products they buy), so their warehouses are just places of distribution for goods.
There are several key differences between distributors and suppliers. Distributors can sell to the final consumer or other businesses, while suppliers almost always sell to other businesses that will eventually sell to the final consumer. Distributors and suppliers may also both provide physical products to a company. In the case of distributors, they’re not the actual manufacturer of the product. They merely stock goods for the manufacturers to pull materials from. When there are issues with the materials, the distributor often acts as a mediator between the true supplier and the manufacturer. Alternatively, the manufacturer may choose to work directly with the supplier for future procurements to save on potential costs and strengthen their relationships with suppliers.
What is a Manufacturer
A manufacturer is typically a company who manufactures goods in bulk with the intention of providing them to other companies or individuals to resell at a market price. Wholesalers of water bottles, for example, may sell to any company that wants to private label their own brand of water bottles to resell.
A manufacturer (or wholesaler) may also have distributors or suppliers. In some cases, the wholesalers manufacture a portion of their products so they can provide bulk products at low cost, but they also have other suppliers of products in bulk that they do not make, which they sell to companies that then repackage and sell those products.
Distributors and manufacturers differ in some key areas. Distributors and wholesalers are very similar in that they both sell products to businesses or consumers that they house in a warehouse. The distinction is that distributors keep products in stock but don’t manufacture them, while a wholesaler is typically a manufacturer that intends to supply other companies with products they can white-label or repackage into other products. White-labeling is when a company rebrands products that they receive from a wholesaler so the product appears to be their own. The goal of a wholesaler is to provide companies and/or consumers with bulk goods at a discounted cost, whereas a distributor is not as concerned with bulk or cost and is oftentimes more concerned about the product and material availability (i.e. lead times). They typically only provide one part or parts in bulk.
The purpose of this blog post was to help you clarify some of the differences between the supplier, distributor, and vendor in the supply chain. They all work towards taking the supply chain process to the next level.
According to Forrester, the US B2B e-commerce industry is expected to reach $1.8 trillion by 2023, which would account for 17% of all B2B sales in the country.4 With Amazon and other B2B companies transforming the way we think about buying and selling, manufacturers, distributors and wholesalers are constantly working toward new ways to improve their supply chain.
Whether you’re a B2C retailer or a B2B organization, understanding the differences between these three parties is key to getting your product to market quickly and successfully. Although you may not work directly with all three, Exporta Wholesale can help you understand the function and purpose of manufacturers, distributors and wholesalers. We aim to assist you better understand the flow of the supply chain and choose the best partner for your business.
About Exporta Technologies
Exporta Wholesale is the largest marketplace connecting suppliers in Latin America with buyers in North America. Today, we have a network of over 5,000 Latin American suppliers serving a variety of consumer goods and product categories in the United States.
Exporta’s marketplace offers buyers a full service experience in the origination, sourcing and managing of products. The platform was founded on the idea that curation and service are the most important elements in the buyer’s journey. Exporta’s marketplace is building technology that addresses the pains of sourcing products internationally at attractive prices.